Recently, China is facing limitations in economic growth driven by the expansion of factor-inputs which allowed China to achieve economy of scale, using its abundant labor and capital. Therefore, China now is seeking to change its paradigm of economic growth into an innovation oriented one where knowledge increases economic productivity. As a result, investment in research and development (R&D) and patents have sharply risen. This would be a good time to assess the policies and strategies for R&D in China to draw up some meaningful implications. This study contains Chinese government policies for R&D, current state of Chinese firms’ R&D, characteristics of Chinese patents according to the new method of patent classification and Chinese firms’ reverse-innovation and globalization strategies.
This study is made up of six chapters. The introduction is followed by Chapter 2, an overall review of Chinese science/technology and innovation policy. Chinese policies on science and technology formed the basis of ‘Deng Xiaoping Thought’ after the era of reform and openness began. In 1985 the “Decision on the reform of science- technology system” presented a basic direction for reforming the science-technology system and policy. This led to more specific reforms of the science-technology system, and various policies have been implemented at each stage of market reform in accordance with long-term strategy. Chinese government has since formulated a medium and long-term science and technology policies for innovative nation building to achieve sustainable and harmonious economic growth. The government bodies and agencies are leading the way in implementing such policy including diverse R&D promotion programs.
It is undeniable that these efforts produced remarkable improvements in China’s scientific/technical capacity in general, yet more time and greater enhancement are needed for self-sustained innovation. In the end, the extent of China’s science/technology development hinges on effective policy management and the government’s determination to improve its institutions. A desirable direction for China’s medium-long term science-technology policy would be to build up its market competition system, to expand investment to support R&D of private firms; and to establish networks and enhance the quality of education for development of human capital.
Chapter 3 deals with the current state and characteristics of Chinese R&D activities. In the past, the role of firms as agents of innovation was underestimated in China. However, the domestic entities, especially innovative firms and high-tech enterprises have lately emerged as the main applicants of Chinese patents. This chapter features an empirical analysis of the relationship between Chinese R&D and productivity. The analysis finds that the increase of trained personnel in high-tech industry R&D is contributing significantly to increase in the number of patents and productivity.
In Chapter 4, the changes in the environment for Chinese patents are described by examining the three revisions of patent laws, and a micro-analysis on the patent distribution and patentees in order to assess the capacity and growth potential for Chinese innovation. China enacted its first patent law in 1985, and modified the patent-related systems by revising the patent laws three times by 2008. The first and second revisions were, to some extent, forced by external factors such as the international pressure of intellectual property rights protection, and the necessity for WTO entry. In contrast, the third revision was initiated by the internal need to enhance the level of patent right protection. There are certain limitations in effective intellectual property rights protection in China because of remaining legislative and legal problems, but the application and registration of patents in China in real term is very active given such institutional circumstances.
The convergence of technical knowledge portfolios between Chinese domestic firms and the multinational enterprises in China were identified in the analysis of patent statistics according to a re-classification of Chinese patents. Also, improvements in technical knowledge by Chinese domestic firms and localization and adaptation by foreign companies to China are simultaneously in progress; the former being dominant over the latter. In addition, the proportion of Chinese domestic firms or the university/research institutions that has risen to within the top 10 of each 35 industrial technology areas has increased. The result implies that the Chinese domestic firms have, for the most part, succeeded in catching up in terms of technological capacity.
Chief findings of the micro-analysis on the main entities of invention patentees in China are as follows; first, Chinese domestic entities of invention patent applications increased conspicuously in IT sectors including in electronics, computers, facility hardware sectors including machinery, civil engineering and measures/standards. Second, the top three petroleum firms, that is, the main state-owned enterprises (SOEs) directly controlled by the Chinese central government possess considerable patent technology. Third, some foreign-investor firms including Taiwanese firms are operating affiliated companies that have applied and registered invention patents in China. These companies are able to utilize the abundant engineering manpower in China and strengthen the protection of intellectual property rights of their affiliates regarding production processes, and products produced and sold in China. Fourth, in China, the universities and research institutions are the main agencies that possess patents, especially in high-tech areas where industrialization has yet to kick into high gear, in addition to science-based industries where the application of primary research to industrialization is easily implemented; and general purpose technology areas such as measurement, controlling and analysis methodology etc.
In Chapter 5, the internationalization strategy of five types of emerging multinational enterprises (MNEs) as described by Ramamurti was referred to in analyzing the innovation factors and reverse-innovation among Chinese firms, by classifying the Chinese R&D firms into 5 types. Also, case studies for each type were performed to assess the main contents and characteristics of technological innovation strategies of these firms.
The first type is state-owned Natural-resource vertical Integrators that include most SOEs which secure technological capacity by strategic integration to develop foreign resources. Large-scale support from the government allows these enterprises to catch up with the leading firms rapidly. The second type is local optimizers that engage in market-oriented innovations to develop the products to be optimized according to customers’ needs in the local markets. It is very possible that these firms became familiar with reverse innovation by exporting products optimized for the local market to developed countries. The third type is the low-cost partners that MNEs of developed countries utilize to reduce production costs. Reverse innovation can take place when MNEs receive the spillover effects of technological innovation from Chinese firms. The fourth type is global consolidators that attempt to carry out the strategic consolidation to enhance the technological capacity up to the international level. The strategy, of course, is to innovate through the process of technological catch-up by consolidation. This has potential to spread out the results of innovation from interactions among consolidated enterprises in the domestic venue into the developed world. The fifth type is a global first-mover, which is the most typical reverse innovator. In this instance, independent of external effects, local Chinese firms achieve independent R&D outcomes and the results spread into the global level.
The implications of R&D by Chinese firms and measures in response are suggested as follows:
First, the main response measures for dealing with the Chinese R&D policies would be to promote the technological cooperation with focus on the 7 strategic emerging industries, formulate strategies to cope with the growth of Chinese firms in the high-tech industries, and support joint R&D by the small and medium enterprises with Chinese companies. The technological cooperation with China should be reinforced in energy-saving, environmental protection, bio technology and new energy areas that overlap with Korea’s new growth engine industries. Also, it is imperative that specific and novel innovation strategies be established to minimize the impact of technological catch-up of China in high-tech industries, along with settlement solutions in case of patent disputes. The policies are needed for supporting SMEs that lack the capacity to establish R&D centers in China so that they may conduct joint R&D or take advantage of R&D centers established by conglomerates or government bodies.
Second, another measure that Korea can enact to counter globalization of Chinese firms would be to set up strategies to develop the technologies through Korean companies’ affiliates in China. Just as many foreign firms including Taiwanese firms are applying and registering patents in China, Korean firms also need to create effective portfolios of local patents in China. Furthermore, we need to deal with various challenges from Chinese global firms in accordance with their types of firms: firms that achieve growth by taking country specific advantages (CSAs), catch-up through innovative progress and self-innovation.
Third, policy measures related to R&D cooperation should include strengthening R&D cooperation with universities and research institutions in China, establishment of R&D cooperation models between the governments and providing directions for cooperation in technical standards. Cooperation should be concentrated in universities and research institutions that dominate in terms of the proportion of invention patents in high-tech areas where industrialization is still in its infancy, or in general purpose technologies. As for R&D cooperation between the governments, it might take the form of mutual funding frameworks as in the case between China and Germany, and should be focused on core industries later on. Lastly, the cooperation in technological standard between Korea and China should continue in areas that the new technologies have been introduced and the industrialization has just begun.

The center of the global economy has been gradually shifting to emerging economies with developed countries hit hard by the global financial crisis that started in the United States in 2008 and the recent Eurozone crisis. Since 2012, the GDP growth rates of even those emerging economies have been declining; yet, at the same time, the role of emerging economies like India as the pillar of global economic growth is becoming more important, and so is economic cooperation with emerging economies. According to Global Insight, the average GDP growth rates of the U.S, EU, and OECD countries for 2011~2015 are projected to be 2.4%, 0.9%, and 1.9% respectively, while that of India for the same period is estimated to be 6.7%.
The present report seeks to examine economic cooperation between India and the three selected Asian countries, and offer policy recommendations for Korea’s economic cooperation with India. Japan, Singapore, and China are selected for purposes of the present research, given their high level of economic cooperation with India. The study undertakes comparative analysis of the current status of economic cooperation including policies and strategies focusing on trade, investment, and the FTA. In recent years, Japan, Singapore, and China have been stepping up economic cooperation with India, capitalizing on their comparative advantages and strengths. In particular, FDI flows from Japan and Singapore to India have been increasing at a rapid pace since the late 2000s; Japan and Singapore are ranked India’s 4th and 2nd largest foreign investors in terms of accumulated FDI for the period of April 2000~August 2012, while Korea is ranked 13th. Apart from FDI, Japan, the only country from which India receives ODA(Official Development Assistance) among the three countries, has also been actively utilizing ODA to participate in large-scale infrastructure projects in India. It has also helped build industrial parks exclusively for Japanese companies operating in India. In the case of Singapore, the country signed the FTA with India early on, benefiting from long-standing historical ties and a large Indian community within the country. In addition, Singapore has been utilizing state-linked companies to enter the Indian market, mainly focusing on sectors wherein it enjoys comparative advantages. In the case of China, while its investment in India has lagged, the country has emerged as the largest trading partner for India. In addition, it has been playing a significant part in infrastructure development in India.
Based on the analysis of the three countries’ economic cooperation with India, the following policy implications/recommendations are offered for Korea’s economic cooperation with India. First, it is recommended that bilateral cooperation mechanisms between Korea and India be enhanced. As in the cases of the three countries’ relations with India, regular high-level meetings need be established. Enhancing the Korea-India strategic partnership established in 2010 would be a good starting point to upgrade bilateral intergovernmental mechanisms to a summit level. Cooperation should not be limited to the central government level, as cooperation with India’s state governments should also be further promoted. In addition to intergovernmental cooperation, ties between private sectors of the two countries should also be expanded.
Second, it is necessary to increase the impact of Korea-India CEPA (Comprehensive Economic Partnership Agreement). Tariff concessions in both goods and services need to be increased, as they are currently lower than those of India-Japan CEPA, and India-Singapore Comprehensive Economic Cooperation Agreement(CECA). To that end, the Korea-India CEPA joint committee would have to play a more active role. In addition, ways should be sought to expedite the utilization of certain provisions of CEPA such as the movement of IT professionals, and co-production of audio-visual materials. In addition, with regard to a provision concerning the opening of bank branches, the allotted time frame would have to be extended.
Third, assistance from the government should be scaled up for Korean investors bound for India to help increase their access to the Indian market. Korean investment in India has been lagging far behind that of Japan or Singapore. Korean companies need to be more aggressive in penetrating the Indian market, for which effective policies are needed. In particular, in order to facilitate the participation of Korean firms in large-scale infrastructure projects that have been increasing recently in India, Korea needs to formulate its own strategies, but without tools such as Japan’s ODA or Singapore’s state-linked companies at its disposal.
Lastly, building industrial parks for Korean companies in India could help enhance Korea-India economic cooperation. As Korea does not have experience in building industrial parks in India, joint efforts with Japan or Singapore should be given consideration. However, should Korea decide to go in alone, forming joint ventures with India’s state governments or development corporations under state governments would prove to be wise.

Financial Regulation and Supervision at the EU level has been implemented with the formation of the European Single Market. In the 1980s, there was a significant increase in the number of cross-border financial transactions as free capital movement within the EU territories, mutual recognition of regulation and the supervisory responsibility of the host country were established as the principles of the EU internal financial supervision. However, blind spots in financial supervision have been consistently pointed out as large banks, which operates beyond one member country and set of problems, resulted from mismatch between the financial integration and territorial boundaries that appeared. Therefore, there have been increasing need for harmonizing different financial regulations among member states.
Institutional limitations have been made clear on the EU financial regulation and supervision in the response to the European sovereign crisis. As a result, the demands are increasing for reforms on financial supervision. In particular, new supervisory arrangements should concentrate not only on the prudential of individual firms but also on the macro-prudential, and furthermore, there are increasing need for a more integrated financial supervisory institute as the more efficient measure to supervise the integrated European financial market. ESRB (European Systemic Risk Board) is the product of these considerations, an institution responsible for the macro-prudential oversight of the financial system within the EU. Simultaneously, the European Supervisory Authorities (ESAs) were established, which oversees such areas including banking, securities, and insurance and pension. In other words, even though financial supervision is still in the competence of member states’ authorities, ESRB has rights to issue strong recommendations or alerts. In addition, ESRB can participate in the decision-making process in details of regulations at large.
The perception that loose financial regulations had caused the global financial crisis has been widespread. Many countries moved towards reinforcing their financial regulations. The EU is also developing methods for financial regulation at the EU-level, in order to regulate the credit-rating institutions and to introduce an EU-wide financial transaction tax. Recognizing the mixed interests among business categories and dissonance within the EU member states clearly shows that such financial reform is yet unfinished. However, the fact that the EU and the member states have developed their agreed-upon financial regulations into a global agenda through G20 meetings should be emphasized. 
At the EU and national levels, regulatory authorities are implementing or planning reforms of institutional arrangements for financial supervision. In spite of integrated supervision and regulation at the EU level, EU Member States still retain enforceable supervisory power. Recent developments in supervisory structures in the EU Member States are as follows: (i) a tendency towards further enhancement of the role of national central banks in supervisory activities; (ii) a consolidation of  information-related synergies between central banking and prudential supervisory function in the case of the single supervisory authority.
The euro-area crisis triggered the move towards a banking union. The ‘doom loop’ linking sovereign and banking credit condition has been correctly identified as a key transmission channel that needs to be addressed to prevent further deterioration so that eventual improvements can be envisaged. The creation of a single supervisory mechanism, deposit insurance system and clearing system is an important move that will complete the creation of a European banking union. The first step is the creation of the Single Supervisory Mechanism with a central role conferred on the ECB.
EU’s financial reformation has the following implications for Korea. First, macroprudential supervisory activities and policies should be reinforced. Second, the supervisory authorities should strengthen their cooperation system. Moreover, Korea should search for a systematic framework to protect financial consumers. In terms of financial regulations, financial stability should be considered, while maintaining flexibility in speed and the level of adoption of the global trend in financial regulations. Considering that EU’s financial regulations tend to develop into a global agenda, Korean authorities should make their stance and insist on Korea’s position through international financial consultative bodies such as the G20 or the IMF.

The global financial crisis of 2008 prompted the United States to reassess its whole economy as well as financial markets. Numerous studies suggest that the reason for the crisis should be found not simply at financial malfunction, but more fundamentally at structural elements. This study aims at making an assessment on whether the post-crisis economic policies have been re-aligned to remedy its structural flaws and fundamentally reform the economy.
Until the global financial crisis after the 1980s, the economic policies were oriented toward deregulation, notably at the financial industry. Internally, the growth of the service industry such as financial services was regarded to be positive and natural from the comparative advantage perspective. As well, the United States was not alerted to the loss of competitiveness in stale manufacturing industries, and instead paid attention only to the rise of knowledge-or innovation-based industries. Externally, although it adopted measures such as the FTA to open partner's markets more, it tended to put an emphasis on strategic aspects more than its economic interests.
It is certain that after the financial crisis there was a shift in the economic policy stance of the United States. In summary, the pre-crisis deregulation and strategic-interest-first policy turned into re-regulation and economic-interest-first. Specifically, it started to move the focus on the revival of the manufacturing away from the financial or service industry, and to consider practical benefits such as export and job creation more than geo-political or strategic aspects in the trade policy. Also, instead of financial deregulation or innovation which was a cause of the financial crisis, it chose tighter regulation and supervision on risky financial transactions.
However, those policy re-alignments should not be overstated. The change in the policies is hard to assess as formation of a new paradigm or a fundamental shift. In that sense, the policy changes after this financial crisis are different in nature from those after the Great Depression which were certainly a fundamental shift. One of the reasons for this difference is that the recent crisis was not so destructive as the Great Depression of the 1930s. Another reason might be found at the difference in political circumstances. In the wake of the Great Depression, the ideological gap among political parties rapidly narrowed so that it created a political environment for a comprehensive economic transformation. But now the politics of the United States is characterized as polarization which means widening divergence in political ideology. This polarization leads to a fierce political confrontation hindering requisite reforms.